As November prepares to unfurl its drizzly cloak and Europe plunges into its fifth dark winter of financial crisis, it is easy to become gloomier over the extent to which we are still in a quagmire and ask why still no one knows the way out.

In five long years, the crisis has undergone something akin to the model of grief proposed by Elisabeth Kübler-Ross, a pioneer of near-death studies. First there was denial (surely it was only Lehman/only in the US/not us, Sir!), anger (why didn’t we see this coming?), bargaining (with regulators, mainly), and more recently, as crisis metastasised from Lehman to Europe, Whalegate and Liborgate, the depression set in. By September this year, the banks looked like they were reinterpreting their figures and began a series of job cuts that set the tone for a dismal autumn and led to fears of a “Christmas bloodbath”.

Hardly a winter wonderland or a bright outlook for the first quarter. But hold on, if Kübler-Ross’s model is right, there’s another stage on the horizon: acceptance. It’s the final one, and then we’re done, healed, metamorphosed. There is every chance that this is happening, and here are three indicators suggesting the new normal is beginning to take shape.

i) The end of denial

“It’s been the pig in the python,” commented one consultant, who said a small number of firms have been so unable to digest the new reality and retrench as revenues dried to a trickle that their chances of survival are now slim. The worryingly slow pace of deleveraging aside (cheap central bank lending has kept balance sheets bloated and in some cases even caused them to grow), banks are asking the grown-up equivalent of “are we nearly there yet?”. Another consultant says that clients accept what comes next is a complicated labyrinth of regulation and rationalisation, but they are at least no longer in denial that it’s time to get under way.

Giles Williams, head of KPMG’s Financial Services Regulatory Centre of Excellence, said: “Clients are crying out for certainty and closure so they have the ‘full picture’ and can get on with execution.”
A report from Oliver Wyman and Morgan Stanley earlier this year said capacity amounting to 15% needs to be kicked into touch, with banks having to choose where they have comparative advantages.

The unpalatable truth is that there are still only a few known knowns. The general direction is clear: there will need to be more capital, less overall risk and more central clearing. Beyond that, the puzzle is in various stages of development and implementation and the landscape – and unintended consequences – are still foggy.

The good news is that retrenchment could improve return on equity at wholesale banks by four to five percentage points, according to the Oliver Wyman and Morgan Stanley report. The bad news is that if they maintain their existing business models, their average return on equity would fall to 7% by 2015 against a cost of equity projected to be more than 9%, according to McKinsey.

ii) A focus on relationships

Paul Volcker, former chairman of the US Federal Reserve and architect of the Volcker Rule limiting proprietary trading at banks, told the UK Parliamentary Commission on Banking Standards in London two weeks ago that US banks, while not out to “screw” their customers, had lost sight of the relationships they have with their clients.

Ken Moelis, veteran Wall Street dealmaker, told this newspaper that the deal bonanza that characterised the years from 2001 to 2007 was an aberration, and investment banks lost sight of an advisory model that had worked for 250 years, where clients went before profitability even if it meant your best bankers didn’t bring in deals for two years.

In a note written earlier this year, Accenture said: “The economic malaise has in no way stopped client expectations from continuing to rise. Indeed, the opposite seems to have happened. Investment banking clients are facing increasingly demanding consumers who are passing the pressure they are under directly on to the banks that are providing them with services. Being seen as a long-term partner by clients is one of the most effective ways of dealing with this pressure.”

Moelis said there was a whole generation of chief executives that believed the investment banking model during the boom years is all there is. Some of the most experienced dealmakers on the planet – Joe Perella, Benoit D’Angelin, Michael Tory, Simon Robey – have stepped off that treadmill to go independent, giving impetus to the argument that the value of long-term relationships is greater than the value of a huge balance sheet and deals at any cost.

Greenhill has swung to a profit, Evercore has doubled revenues, Ondra’s were up 150% to March 2011, Moelis is ahead of his old firm, UBS, in the US league tables for volumes and has been profitable since it started. Tiny boutiques have worked on enormous deals. As investment banks have cut staff, boutiques have added them. When investment banks were partnerships, bankers’ own money was on the line. That was an attractive structure for clients and a self-regulating mechanism for the bankers. This old-fashioned model now has new legs.

iii) Renewed integrity

During the bull market, it is said that two bankers working on one of the most ill-advised mergers in history each bought a Ferrari to race back from the south of France to London. One never used the car again, parking it in his bank’s car park to hide the extravagant purchase from his wife. It skirts no ethical boundaries, but it smacks of excess. It’s behaviour that’s hard to defend, and that has become rarer as bonuses and deal fees shrink. Five years of navel-gazing and chastisement have blown away the froth of competitive wealth.

Contrary to public belief, most investment bankers have integrity. Ask any banker worth his salt and he will tell you that the financial markets in their current guise, buffeted by political wrangling and turned over by one regulator and then another, have become places of huge intellectual stimulation, saturated with challenges that befit their expensively educated workforce.

Far from mouldering, the strongest talent is flourishing. One senior banker told me: “The workforce is dynamic, energised and motivated. Deals cannot be whipped up from thin air, execution is less certain and advice no longer ‘cookie-cutter and commoditised’. It is the most intellectually stimulating place I could hope to work.”

Shareholders are acting as guardians of the new normal. Hendrik du Toit, chief investment officer of Investec Asset Management, implored his peers three weeks ago to step up to the challenge. “My cry to the industry is that all of us understand that we have to engage and interact better, and present ourselves better and make sure our industry remains of the highest integrity.”

Autumn heralds each new year of the crisis. Each one has brought new reasons to despair. It is hardly time for a Pollyanna moment, but progress this year is palpable and the shape of the new normal is coming into sight. Strait-laced and sober, cerebral and challenging, it is time to accept it.